US Politics

America's high-stakes gamble on spending cuts

How voters react to first spending cuts could shape future of Republicans and Democrats

PUBLISHED : Sunday, 03 March, 2013, 12:00am
UPDATED : Sunday, 03 March, 2013, 5:49am

The fallout from federal spending cuts over the coming weeks might alter America's political landscape for years to come.

A decade of budget deficits run up in war and economic crisis has saddled the government with a US$16 trillion debt.

Now the government is about to start cutting spending in some programmes, offering a first look at how the US people will react.

If they feel the sting of the so-called sequestration, they might rise up and send a signal that the country really wants to keep all of the government it now gets.

But if the majority don't feel any pain from the cuts, they will probably invite more moves to reduce spending.

Either way, it's a high-stakes gamble for both Democrats and Republicans, with the winner likely to dominate the debate - and perhaps elections - for years.

So far, Americans aren't paying much attention. Just a quarter followed the news closely last week, according to the Pew Research Centre.

That amplifies the urgency for the parties to try to define the budget cuts on their terms.

It also explains why President Barack Obama spent the last two weeks pushing the idea that the reductions are cruel and thoughtless. He needs people aware and angry to bolster his argument for more taxes and fewer spending cuts.

Democrats are betting that the American people will hate the reductions and demand tax increases instead.

The danger is that they might have overplayed their hand.

First, some of the most extensive and popular federal programmes, such as Social Security, won't be trimmed.

Second, the cuts will take effect slowly and might not be felt in time to affect the debate over extending government funding past March 27 or whether to raise the government's debt ceiling past May 19.

There might be an eventual pay-off, though. As the sting of cutting spending intensifies, Democrats think, so will their electoral prospects.

Republicans placed ownership of the sequestration on the president and his party for failing to come up with an alternative proposal.

"Even today there's no plan from Senate Democrats or the White House to replace the sequester," House Speaker John Boehner, said.

Republicans also know that their tactics might backfire.

Pew found last month that 62 per cent saw the party as out of touch with the American people, and 52 per cent branded it as too extreme. Democrats had far lower numbers.

And Obama has the bully pulpit - no Republican is as recognised, and no Republican speaks for the party the way he speaks for the Democrats. Virginia Governor Bob McDonnell said: "Somehow, we have to find ways to cut spending, but do it in a way that's seen as reasonable."

But the parties agree on one point - both sides face the risk their stubbornness will further alienate already-weary voters.

The public have demonstrated their impatience in recent midterm elections. Democrats retook the majorities in Congress in 2006 and lost the House majority four years later.

That suggests swing voters don't feel loyalty to either party, but instead are sceptical that either side knows what it's doing.

Now the stakes are even higher, because Washington's decisions will be keenly felt.

Additional reporting by Bloomberg